Can RRSP funds be transferred tax-free as part of an equalization payment in Ontario?

Yes. Under the Income Tax Act (a federal law that applies in Ontario and all provinces), RRSP funds can be transferred directly from one spouse's RRSP to the other spouse's RRSP on a tax-free basis as part of a settlement related to marriage breakdown. This is commonly called a "spousal RRSP rollover" or "marriage breakdown transfer."

To qualify, the transfer must be made pursuant to a court order or written separation agreement that deals with the division of property on marriage breakdown. The funds are transferred directly between institutions — they are not first withdrawn and then recontributed, which would trigger tax.

This rollover is a valuable planning tool: it allows an equalization payment to be satisfied using retirement savings without either spouse incurring immediate tax. The receiving spouse assumes the RRSP and its deferred tax liability. Because the mechanics must follow strict federal rules, it is important to coordinate between legal counsel and financial advisors to ensure the transfer is structured correctly.